Comment-------9. (SBU) Morocco has been an exemplary partner in the struggle against terrorism, and our military and political cooperation is growing. Morocco serves as a regional model for economic and political reform, and continued U.S. political/military assistance and engagement will help advance the positive changes underway and ensure the country remains a stable ally and a leader in the North Africa region.

1. (C) President Bouteflika pleaded for U.S. assistance tofind a breakthrough on the Western Sahara stalemate duringAmbassador's farewell call on June 24. Bouteflika said theU.S. had always supported self-determination, and theapparent change in policy to support Morocco's position ispainful and confusing to Algerians. He added that he hasbeen very careful not to let the bilateral relationshipsuffer due to the U.S. change of policy on Western Sahara,but with the U.S. and France backing Morocco, "we have ourbacks against the wall."

2. (C) Ambassador told Bouteflika that the U.S. alwayssupported the idea of autonomy as a way to remove forward ina pragmatic manner. He said that if the two parties did notadopt a realistic stance, the current stalemate could lastanother 30 years or even longer. Ambassador said that itwould be better for the Sahrawi refugees to live under a goodautonomy plan rather than to continue living in refugeecamps. He added that the U.S. did not ask the Polisario toaccept Morocco's plan, but to accept negotiation on autonomyand put their own proposal on the table. Ambassadorcontinued that the U.S. would be supportive of a broadmeasure of autonomy. He cited the example of the Kurds inIraq who enjoy wide authorities within a united Iraqi state.

3. (C) Bouteflika responded that Algeria will not compromiseits position on the Sahrawi right to choose independence,adding that the Algerians consider this a matter ofprinciple. Powerful states should not be allowed to crushthe weak. Bouteflika said that the U.S. had supported theindependence of East Timor and therefore should also supportthe Sahrawis. The Polisario has its own diplomatic influenceon the African continent, he added, which is somethingAlgeria cannot simply ignore. Bouteflika commented that theMoroccans had erred in linking the security of the throne tothe Western Sahara. Algeria did not seek to de-stabilizeMorocco. Moroccan stability, he insisted, was vital forAlgerian stability.

4. (C) Bouteflika told Ambassador it should be up to theSahrawis to decide if they want independence even if thefinal solution comes in stages over a course of years. Headded that this was the reason Algeria was so fond of theBaker plan. After Ambassador emphasized that the Baker planhad not generated any movement towards a solution, Bouteflikawas non-committal and again pleaded for U.S. help to resolvethe current stalemate.

5. (C) Comment: Clearly Bouteflika will not press theSahrawis very hard on sitting with the Moroccans to discussonly autonomy; the Algerians have told us this consistentlythroughout the last nine months. That said, as he did withNEA Assistant Secretary Welch (ref), Bouteflika indicatedthat he wanted to find a way out of the impasse. There justisn't any creative thinking here about how to do it.FORD

1. (C) SUMMARY: King Mohammed VI received NEA A/S Welch foran hour on February 25. The wide-ranging exchange of viewsfocused on bilateral cooperation, the Middle East PeaceProcess (MEPP), Iran, Kosovo, Lebanon, Mauritania, Syria,Algeria and Western Sahara. In most respects, the audiencemirrored the meeting that preceded it with Minister ofForeign Affairs Fassi Fihri and MFA Director General forMultilateral Affairs Mohamed Azeroual. However, we heardthat Amr Moussa,s latest visit to Beirut had been "acatastrophe;" the Emir of Kuwait did not plan to attend theArab summit in Damascus; and Morocco was looking at otherArab countries' reaction to Kosovo's declaration ofindependence. The King asked us to assist Mauritania andwarned that the POLISARIO must not attempt to occupy the areaeast of the berm in Western Sahara. In his meeting with theForeign Minister, Ambassador Welch pressed for an agreementon the status of the American schools in Morocco and informedthe Minister of a planned accord with the U.S. HolocaustMemorial Museum. END SUMMARY.

BILATERAL COOPERATION---------------------2. (C) Receiving NEA A/S Welch, the Ambassador, DCM and ErinYerger, the Executive Assistant to Deputy Assistant to thePresident for National Security Affairs Elliot Abrams, at theroyal palace in Marrakech on February 25, the King thankedthe United States for the excellent cooperation oncounterterrorism, the Millennium Challenge Account and theFree Trade Agreement. Foreign Minister Fassi Fihri alsoattended the audience.

KOSOVO------3. (C) The King noted that he had just met with the GreekForeign Minister, who urged him not to recognize Kosovo. TheKing and the Foreign Minister indicated that they intended todiscuss recognition with other Arab leaders at theOrganization of the Islamic Conference (OIC) Summit in Dakarin March. Fassi Fihri said the Serbian Foreign Minister hasalso requested a meeting.

MIDDLE EAST PEACE PROCESS----4. (C) Ambassador Welch began by underscoring that this isan important year for the region and that the President isdetermined to make progress on the MEPP. Welch briefed theKing and the Minister on the process and assured them thatthe Israelis and the Palestinians are making progress, butthe public is unaware of it. On Gaza, Welch averred thatIsraeli Prime Minister Olmert is focused on the least badoption. For his part, the King expressed deep concern aboutthe humanitarian situation in Gaza.

LEBANON-------5. (C) Turning to the continuing leadership vacuum inLebanon, A/S Welch said that we see three options: 1) tocontinue efforts to elect a President by consensus; 2) toelect a President with 50 percent of the vote plus one; or 3)to support the Siniora government. Welch indicated that weincreasingly believe the third option affords the best meansto support Lebanon,s institutions. Asked about Arab LeagueSecretary General Amr Moussa's visit to Beirut, Fassi Fihri

SIPDIScharacterized it as 'a catastrophe.'

SYRIA AND THE ARAB LEAGUE SUMMIT--------------------------------6. (C) Noting that Kings Mohammed VI and Abdullah II ofJordan had come to power at approximately the same time as

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President Bashar al-Assad, Welch decried Syria,s lostopportunities. Welch said that he understood that the SyrianForeign Minister would be in Marrakech on February 26 todeliver an invitation to the Arab Summit in Damascus, andWelch predicted that attendance would be poor. The King saidhe understood that the Emir of Kuwait did not plan to attend,implying that Morocco would be represented at the ministeriallevel at best.

IRAN----7. (C) Ambassador Welch asked if he might say a few wordsabout Iran and its pursuit of nuclear weapons. The Kingresponded that he understood that Iran had suspended itsnuclear weapons program. Welch thanked the King for theopportunity to clarify, declaring that the U.S. intelligenceestimate had been misunderstood and that the reporting onthis issue has been unclear. Welch said that we continued tobelieve that Iran was pursuing nuclear weapons; so PresidentBush was seeking a middle ground "between the bomb andbombing," without giving up any option. Diplomatic pressureis best for now. When the King asked what that middle groundmight look like, Welch said that more SecurityCouncil-approved sanctions loom and that Iran must accept adiplomatic solution.

ALGERIA-------8. (C) The conversation then turned to Algeria, and Welchasked if the GOM had any views on President AbdelazizBouteflika,s plans. The King said he understood thatBouteflika was amending the Constitution to permit a thirdterm, and Welch noted wryly that Bouteflika was doing sowithout Syrian assistance. The King praised the "frustrated"Algerian Ambassador in Rabat for his tireless efforts toimprove bilateral relations, stating, &We have no relationswith Algeria, except for limited cooperation on securityissues." In spite of obvious opportunities for cooperationin agriculture, energy and a host of other areas, PresidentBouteflika and his government clearly prefer the status quo.The King noted that he had even traveled to Algiers to try tobreak the impasse, but the GOA continues to insist on theWestern Sahara issue being resolved before proceeding withother bilateral or regional initiatives.

WESTERN SAHARA--------------9. (C) The King and Fassi Fihri expressed grave concernabout the POLISARIO's stated plans to move people into thearea east of the berm. The King said bluntly that Moroccocould not allow that. Praising the King,s autonomyinitiative, Welch urged the GOM to press ahead with theManhasset talks. He said support for Morocco,s position isgrowing ever so slowly. Separately, Welch cautioned theKing's intelligence chief against militarization of thedispute.

MAURITANIA----------10. (C) Looking at Western Sahara's neighbor Mauritania, theKing stressed that Mauritania needs help and that he will seethe Mauritanian President in Dakar.

AMERICAN SCHOOLS----------------11. (U) Welch took advantage of a few private minutes withFassi Fihri to underscore the need for an agreement on thestatus of the American schools in Morocco. Noting that hehad attended the Rabat American School (RAS)as a child, Welchsaid if a solution is not found soon that RAS could notproduce more David Welches. Fassi Fihri replied that he had

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been in contact with Prime Minister Abbas El Fassi andDirector General of Taxation Nouredine Bensouda about ourproposal.

U.S. HOLOCAUST MEMORIAL MUSEUM------------------------------12. (U) Welch also raised made the Minister aware of theplanned signing of an accord between the U.S. HolocaustMemorial Museum and the Moroccan National Archives. Welchalso mentioned that the Museum still planned to host aconference on the Holocaust in Arab lands.

COMMENT-------13. (C) Although his face looked puffy, the King appearedrelaxed and rested after four weeks in France. The meetingitself underscored how much U.S. and Moroccan views coincide.END COMMENT.

1. (C) Assistant to the President for Homeland Security andCounterterrorism Frances Fragos Townsend met with PresidentBouteflika for three and a half hours June 18. NSC SeniorDirector for Combating Terrorism Michele Malvesti and DCMaccompanied Townsend. Bouteflika's Counterterrorism AdviserRezzag Bara and a notetaker were also present. This cablereports their discussion of the Western Sahara and relationswith Morocco.

2. (C/NF) Well into the meeting, Bouteflika raised WesternSahara, noting that U.S. visitors always wanted to discuss itwith him. Townsend noted that President Bush had asked bothBouteflika and Moroccan King Mohamed VI to find a way toresolve their differences. Townsend said the Presidentappreciated Bouteflika's role in last summer's release by thePolisario of the remaining 404 Moroccan prisoners, notingthat "this would not have happened without your courage."She asked Bouteflika about his view on fully resolving thisissue. .

3. (C/NF) Bouteflika responded that as the world's biggestpower, the U.S. should respect the decisions of the UN on theWestern Sahara. He recalled that in his first meeting withPresident Bush in 2001, the President had asked him to workfaithfully with James Baker and he had done so. Bouteflikanoted that he had supported the Baker Plan, even though hewould not have done so without President Bush's request.Now, he said, Algeria was "stuck in the middle" with Morocco;"we reject anything they accept and vice versa." Bouteflikacommented that despite this stalemate, he had made twoimportant decisions: the Western Sahara would never be acasus belli for Algeria, and he had made clear to theMoroccans that Algeria had no claims on the Western Sahara'sterritory or resources.

4. (C/NF) Bouteflika asserted that there was no bilateralproblem between Algeria and Morocco. The Moroccans, he wenton, claimed the Western Sahara was an issue between Moroccoand Algeria. "I would solve it if I could," he stated, "butI cannot speak for the Sahrawis." Morocco and the Polisariomust find a solution, and they can do so with American help.Algeria will support any agreement reached by Morocco and thePolisario. But, Bouteflika cautioned, a solution cannot beimposed on the Sahrawis. In that case, Algeria will defendto the end the Sahrawis' right to self-determination.

5. (C/NF) Bouteflika complained that Algeria was in asituation whereby any gesture toward Morocco would be held upby the Moroccan side as the beginning of a process of workingout a settlement bilaterally with Algeria. "So I do not wantto shake the King's hand." However, Bouteflika said he hadrecently met the King's brother, Prince Moulay Rachid, inSeville, where they were both guests of King Juan Carlos.Bouteflika observed that he had found he could have a broaddiscussion with Moulay Rachid. "We joked and chattedcomfortably," Bouteflika commented, "but I cannot do thiswith the King, we do not have the same sense of humor!" Headded that he could also joke with the King's late father,King Hassan II. King Mohamed, however, "is not open, and helacks experience." In a rare moment of self-criticism,Bouteflika said he had found his own weak point: he believedothers should resolve problems through dialogue, but he didnot believe in dialogue for himself with Mohamed VI.

6. (C/NF) Townsend said the Western Sahara continued to be amatter of great interest to President Bush. She added thatthe lack of a settlement was impeding regional cooperation oncounterterrorism and preventing the Maghreb from achievingthe level of economic relations that it should enjoy.Bouteflika suggested that James Baker would be a good sourceof advice to the President, he was a man of "exceptionalqualities." It was a "shame Baker quit," Bouteflikacommented. He then wondered whether the President mightconvince Baker to resume his previous role. Bouteflikaconcluded that offering concessions to Morocco would betantamount to "giving a bonus to the most undisciplinedstudent in the class." The U.S. "should not award Morocco'sbad behavior."

ID: 38855Date: 2005-08-19 11:35:00Origin: 05ALGIERS1753Source: Embassy AlgiersClassification: CONFIDENTIALDunno: Destination: This record is a partial extract of the original cable. The full text of the original cable is not available.

1. (C) Summary. Senate Foreign Relations CommitteeChairman Richard Lugar, accompanied by Ambassador, SupremeAllied Commander in Europe General James Jones, and membersof his delegation met with President Abdelaziz Bouteflika themorning of August 18. Following the meeting, Senator Lugarand his delegation departed for Tindouf to oversee therelease of the last 404 Moroccan POWs held by the Polisario.Lugar expressed appreciation for Bouteflika's efforts tocreate new momentum for resolving the Western Saharaconflict. Bouteflika recalled his commitment to PresidentBush in 2001 to support James Baker, noting that he had doneso and accepted the Baker Plan, but when Baker quit he hadleft a vacuum that had not been filled. Bouteflikareiterated his assurance that Western Sahara would not be acasus belli for Algeria, but said the Polisario had the rightto resume fighting "on its own territory" if it chose to doso. Bouteflika insisted that Algeria would respect theoutcome of a referendum no matter what it was, but would notbe a party to negotiations with Morocco on behalf of theSahrawis. Bouteflika sharply complained about Morocco'slast-minute cancellation of a planned meeting with KingMohammed in Rabat in June by Prime Minister Ouyahia, sayinghe could not accept "dealing with diplomatic relations insuch an irresponsible manner." Referring to advice fromPresidents Bush and Chirac that he bear in mind KingMohammed's youth, Bouteflika said, "I am not Jesus Christ,and will not turn my other cheek." Algeria was ready todiscuss "objective interests" with Morocco, but only if theMoroccans were "serious." Senator Lugar noted that PresidentBush had asked him to undertake this humanitarian mission,adding that the U.S. wanted Algeria and Morocco to reopen theland border and reengage at the highest level. DidBouteflika think the Moroccans understood his position on areferendum? Bouteflika said the Western Sahara had been onthe UN's agenda since the 1970s. Algeria favored respectinginternational law and was defending the right ofself-determination, but would not accept being a negotiatingpartner on the fate of the Western Sahara with France, Spain,Morocco or the U.S. End summary.

LUGAR MISSION-------------

2. (U) Senate Foreign Relations Chairman Senator RichardLugar and his delegation, which included Supreme AlliedCommander in Europe General James Jones, visited AlgeriaAugust 17-18 as part of a Presidential Mission to oversee therelease of the last 404 Moroccan POWs held by the PolisarioFront in Tindouf. Senator Lugar, Ambassador, General Jones,and members of Lugar's delegation met with PresidentAbdelaziz Bouteflika for two and a half hours the morning ofAugust 18 before flying to Tindouf. NEA DAS Gray, EUCOM J-5General Gration, NSC Director Pounds, and DCM also attendedthe meeting, at which Bouteflika was flanked by PresidentialChief of Staff Belkheir, Chief of Defense General Gait Saleh,Council of the Nation President Bensalah, and MinisterDelegate for Maghreb and African Affairs Messahel. Septelreports Lugar and Bouteflika's discussion of U.S.-Algerianrelations and a number of regional issues.

A HUMANITARIAN MISSION----------------------

3. (C) Senator Lugar began by conveying the greetings ofPresident Bush, who fully supported the humanitarian missionto secure the release of the Moroccan POWs. The initiativetaken by Bouteflika should create new opportunities forAlgeria and Morocco and develop momentum toward resolving theWestern Sahara conflict. Lugar noted the UNSYG's appointmentof a new personal envoy, van Walsum, as a positive sign ofthe UN's support as well. Bouteflika warmly welcomed SenatorLugar and his delegation, adding that he was aware of theSenator's record of reaching consensus. Bouteflika said hewas aware that there were some concerns in Washington aboutLugar's planned meeting in Tindouf with Polisario leaderAbdelaziz, but commented that there was no need for concernsince this was a strictly humanitarian mission. TheSahrawis, he said, would talk about their concerns, but thisshould "not offend anyone from the land of Washington andWilson," the leader of a war for independence and thefounding father of the idea of self-determination.

4. (C) Bouteflika recalled his first meeting with PresidentBush in 2001, at which the President had asked him if he wasready to work with James Baker. Bouteflika promised thePresident he would work cooperatively with Baker and had doneso (i.e., accepting the Baker Plan and getting the Polisarioto accept it as well) until Baker had resigned. Baker'sresignation had left a vacuum in the settlement process thatstill had not been filled. Bouteflika praised Baker forbeing able to see the needs of both sides, Morocco and thePolisario's. Baker "represented the American values weadmire."

WESTERN SAHARA NOT A CASUS BELLI,BUT POLISARIO HAVE THE RIGHT TO FIGHT-------------------------------------

5. (C) Recalling the Houston Agreement negotiated by Bakerwith Morocco and the Polisario, Bouteflika said he had stillbeen out of politics then. But at the time, he had thoughtthe agreement flawed because it did not set a deadline forimplementation. He said that if he had been the Polisario,he would have signed the agreement but insisted on the rightto take up arms after six months or one year if it were notimplemented. The Polisario was now paying the price for notinsisting on a time limit.

6. (C) Bouteflika said that when he became President in 1999he had taken a position that was not completely accepted atthe time by the army and intelligence services, i.e. that theWestern Sahara would never be a casus belli for Algeria. ThePolisario cannot drag Algeria into war, he stressed. But ifthey decided to fight "on their own territory," that would betheir decision. If they did so, they would not be allowed tofight in Western Sahara and then return to Algeria as a base.

MOROCCO MUST GO BACK TO UN--------------------------

7. (C) Bouteflika said he had urged Morocco to return to theUN framework. When Iraq invaded Kuwait, the internationalcommunity mobilized itself, but the Western Sahara wasconsidered a "mere tribal issue" even though it had been aSpanish colony. Bouteflika criticized Spain, saying theSpanish Socialists had not been honest with the Sahrawis.From time to time, Spain approached Algeria about enteringnegotiations with France, Morocco and Spain to resolve theconflict. Algeria, however, had no claim to the WesternSahara and would not negotiate on the Sahrawis' behalf.Bouteflika stressed that he was only advocatingself-determination, a principle enshrined in the UN Charter.Morocco wanted improved relations with Algeria, but Algeriawould not respond until Morocco agreed to return to the UNframework. The only thing Algeria asked of Morocco was toaccept UNSC resolutions and international law. That is mysincerest hope, Bouteflika said.

ALGERIA WILL ACCEPT RESULT OF REFERENDUM----------------------------------------

8. (C) Bouteflika said he was ready to sign a document nowcommitting Algeria to accept the result of a referendum,whichever way it turned out. He said he realized areferendum was a "Pandora's box," but Algeria would acceptthe outcome. Algeria would defend the right ofself-determination even if it was the last UN member-state todo so.

"I AM NOT JESUS CHRIST"-----------------------

9. (C) According to Bouteflika, bilateral relations withMorocco had started to gain momentum earlier this year.Prime Minister Ouyahia was ready to visit Rabat with a largedelegation. There were many bilateral agreements withMorocco dating to the 1960s and they were in serious need ofreview. The Moroccans informed Bouteflika that King Mohammedwould see Ouyahia and his delegation. Then, only an hourlater, the Moroccans said that "circumstances were notfavorable" for the visit, even though it had been preparedmonths in advance. Bouteflika underscored that he could notaccept dealing with diplomatic relations "in such anirresponsible manner." Morocco would always be Algeria'sneighbor, neither country would move and they had to getalong. But it was unacceptable to handle serious issues inan "infantile manner." Bouteflika said that in hisdiscussions with Presidents Bush and Chirac, among otherleaders, he was told that the king was young while he was aveteran diplomat. But, he said, "I am not Jesus Christ" andwill not turn the other cheek.

10. (C) Bouteflika recalled that he was born in Morocco andknew that country very well. Morocco stood to gain a greatdeal from reopening the land border, since north-east Moroccodepended on trade with the Oran region of Algeria. Even withthe border closed, Morocco makes three billion Euros a yearfrom smuggling, he claimed. Both countries have objectiveinterests in better relations, but if the Moroccans want todiscuss normalizing relations they must be serious about howthey treat Algeria.

11. (C) Turning to the Arab Maghreb Union, Bouteflika saidthat if the Libyans organized a summit, he would attend inorder to make it a success, not to embarrass anyone. As soonas Morocco returned to the UN framework for the WesternSahara, Algeria would engage on bilateral relations and theAMU.

U.S TRIES TO DO THE RIGHT THING-------------------------------

12. (C) Senator Lugar said the United States tried to act ina manner consistent with democratic values of human rightsand respect for the right of self-determination thatBouteflika had mentioned. The U.S. acted even when its ownnational interests were not directly engaged when it was theright thing to do. It was in this context that PresidentBush had asked that the Senator undertake this mission. ThePresident respected Bouteflika's initiative to gain therelease of the prisoners and was looking for ways to improveAlgerian-Moroccan relations. The U.S. believed the twocountries should reopen their border and reengage at thehighest level. The U.S. wanted to work with Algeria to seehow we could make a difference.

13. (C) Senator Lugar asked whether Bouteflika thought theMoroccan Government understood his position that Algeriawould support the results of a referendum no matter what theywere? Was the question of who would have the right to votestill a significant issue? What were the other principalissues? Bouteflika said the Western Sahara was not a newissue for the UN. Baker had done very good work, and theUNSYG had a complete list of voters in a referendum. Algeriawill accept the results of a referendum, but that did notmean it would "condone Moroccan tricks." The Western Saharahas been on the UN agenda since the 1970s, at the same timeas Brunei, Suriname, and Belize, all of which were long sinceindependent. Algeria supported respecting international law.It would not accept being a negotiating partner on theWestern Sahara with France, Spain, Morocco or the UnitedStates, but Algeria would defend the right ofself-determination.

14. (U) Senator Lugar did not have an opportunity to clearthis message.

Â¶1. (SBU) Summary: In Casablanca, Morocco's largest city and economic capital, prosperity is increasingly on display, raising the question of where it comes from. Family money, the banking and real estate sectors, and a strong-performing stock market account for some wealth. Remittances from Moroccans living abroad, tourism, and foreign investment, especially from Gulf countries, comprise themajor external sources of money. Illicit sources of income including drug trafficking, money laundering and endemic corruption play a role in the growing economy as well. Increased consumption has been aboon to the economy, but Casablanca's wealth must be shared more broadly to benefit all segments of society. End Summary.

Â¶2. (SBU) The easily-observable phenomenon of wealth in Casablanca begs the question of where the money comes from. Many Casablancans cite family money as one key contributor to the city's affluence.According to Samir Benmakhlouf, president of Century 21 Morocco, the textile industry, based in Fez, traditionally drove the Moroccan economy. In the 1970s and 80s, textile producers relocated to Casablanca for retail opportunities, creating economic momentum and bringing money to the city. An article in the Middle East Report on Morocco's bourgeoisie supports this historical view, though dates the shift to the end of World War II: "The economic center of gravity shifted to the coastal cities, especially Casablanca. Enterprising businessmen left Fez for Casablanca, where they continued to be known as Fassis." Even today, natives of Fez retain their reputation as members of a business-savvy elite. One of Morocco's richest men, Othman Benjelloun, hails from Fez and is Chairman and CEO of BMCE,Morocco's third largest bank. According to BMCE employees, a 'Fez mafia' dominates the bank's culture. Benjelloun and others like him belong to a long-standing, moneyed elite who contribute toCasablanca's prosperity.

Â¶3. (U) The banking sector, based in Casablanca, also generates wealth. Morocco's 15 banks include five Moroccan-owned private banks and five foreign banks. Thanks to expanding geographic networks andincreased banking products and services, including e-banking, mortgages and consumer credit, the sector has enjoyed impressive growth. Overall, bank revenues rose 10.5 percent in 2006 to reach USD 2.56 billion. The same year, Morocco's banks registered net profits of USD 825 million, a 68 percent increase over the previous year. Such strong performance has triggered an increase in hiring, particularly of young, well-educated Moroccans. It has also led several of the six banks listed on the Casablanca Stock Exchange tooffer employee stock options, enabling staff members to share in their bank's profitability. BMCE Bank's 2007 Annual Report notes that employees averaged gains of 380 percent from the bank's second public offering, "which is the equivalent of roughly 15 times the net monthly salary." Such tremendous performance has a spillover effect on Casablanca's economy.

Â¶4. (SBU) Just as the banking sector contributes to Casablanca's wealth, so does the real estate market, due to a convergence of factors. The scarcity of land in densely-packed Casablanca puts property at a premium. According to the Oxford Business Group, the city covers 69.5 square miles of land, but needs over 100 square miles to support the current population of over three million. As Moroccans have moved from rural areas to Casablanca, land prices have risen. The influx of foreign direct investment (FDI) compounds this effect. Of the seven billion dollars of FDI that Morocco received in 2007, real estate accounted for 26 percent - second only to tourism at 29 percent. Given that 63 percent of investors find Casablanca the most attractive locale for investment in Morocco, FDI has had a significant impact on property values in the city - and on the development of a market for high-end goods and services.

Â¶5. (SBU) In such an environment, speculation occurs, pushing prices upward and enabling landowners to make staggering profits. No sooner is a new Master Plan for Urban Development (SDAU) announced thanspeculators buy up property in targeted areas with the sole intention of flipping them. According to Century 21's Benmakhlouf, "you can buy property for one million dirham and it'll be worth 1.5 million insix months."

Â¶6. (SBU) The tremendous performance of Casablanca's Stock Exchange is also a factor in wealth-creation. According to Jawad Kerdoudi, an economist who is President of the Moroccan Institute of International Relations, many companies attract investors by listing shares at weak prices for the initial public offering. After a few weeks, prices shoot up, allowing shareholders to sell at a considerable profit. AsMorocco's largest city and economic center, Casablanca sees much of the money that Moroccans make in the stock market.

Â¶7. (U) As indicated above, Casablanca has benefited from an influx of money from outside the country. First, remittances from Moroccans resident abroad (MREs) have risen since Mohammed VI became king in1999, reaching about USD 7.8 billion in 2007. Second, tourism brings in significant capital. The sector has increased 12 to 14 percent per year since 2001, when the king launched the strategic tourism development policy "Vision 2010." According to a 2007 report issued by Casablanca's Regional Investment Center, tourism accounted for more investment in Casablanca than any other sector.

Â¶8. (U) Foreign investment is a third significant source of wealth in Casablanca. Benefiting heavily from rising oil prices, oil-exporting Gulf countries seek substantial investment opportunities in the Middle East, including Casablanca. Dubai Holding, for example, has begun a USD 500 million project to build a multi-purpose marina adjacent to Casablanca's port. A Kuwaiti-Moroccan group has plans for a residential development in the city. Investors outside the Gulf are also pursuing financial opportunities in Casablanca. As money from MREs, tourism and foreign investors is channeled into banks, real estate, the stock market and other investments, Casablanca's economy expands.

Â¶9. (C) Most Casablancans acknowledge that at least some of Casablanca's wealth comes from illicit activities such as drug-trafficking and money laundering. In the words of Khalid Belyazid, CEO of the publishing group Eco-Medias, "We have dirty money. The problem is we don't know how much." Statistics do not exist to quantify how much of Casablanca's wealth can be traced to illicit activities. However, one indication can be found in the USG's own 2007 International Narcotics Control Strategy Report:"Morocco is the world's biggest producer of cannabis resin (hashish) and is consistently ranked among the world's largest producers of cannabis." The report estimates that Morocco's drug trade (mostly toEurope) nets about USD 13 billion per year, more than twice the amount brought in by tourism in 2007. Some portion of this money finds its way to Casablanca, where it is either spent on jewelry, cars, houses and other items, or it is laundered. Referring to the use of cafes as fronts for illegitimate business activities, one finance professional joked that "money laundering creates a nice cafe culture in Casablanca."

Â¶10. (C) Corruption also accounts for a certain amount of Casablanca's wealth. "You cannot imagine how big the impact is," said one long-time resident after explaining the phenomenon of officials exploiting inside information and/or power for financial gain. In one notorious case, a police officer created a business to import BMW motorcycles after learning that the police force had plans to equip a motorcycle brigade. Century 21's Benmakhlouf noted that building permits for land set aside by the city sometimes become available to developers who pay bribes. Such corruption enables those who benefit from it to amass significant, if undeclared, wealth.

Â¶11. (SBU) The informal economy is yet another vector by which individuals amass wealth. While the term conjures up images of small-scale retailers or undocumented laborers, it can include full-fledged businesses that operate outside the legal framework and its requirements. In Morocco's textile industry, for example, entire plants have closed their formal operations, only to reopen outside city limits as all-cash enterprises that function under the radar of Moroccan authorities (or with their complicity ). The Casablanca mattress factory that burned down in late April 2008, killing 58 workers (REF A), offers a prime example of a situation in which a business owner flouted labor, safety and building codes in the nameof profit.

Â¶12. (C) The Consulate's own experience trying to purchase land for a new facility illustrates how entrenched informal, under-the-table arrangements are in the Moroccan economy. Ninety percent of property transactions in Casablanca are done informally. Of over 30 sites identified, more than 20 fell off the list immediately because the brokers were unwilling to sell in an official deal. Others declined to sell because they are waiting for prices to appreciate. Of those who would sell, many wanted money under the table in addition to the asking price. Whether selling property, running a company or starting a business, the high volume of activity conducted outside of formal channels is part and parcel of doing business, and oftenenables individuals to skirt regulations and increase financial gain.

-----------CONSUMPTION-----------

Â¶13. (SBU) Explaining the sources of Casablanca's wealth, however, does not necessarily explain consumption. As Khalid Rouggani of BMCE's research division sees it, Moroccans are 'cultivated to beopen' and want to know what exists outside their country. As a result, they are aware of foreign brands and products, and willingly purchase them, particularly in cosmopolitan Casablanca. In contrast, Rouggani cited Algeria - a country with USD 120 billion in reserves that is less open to foreign culture and less apt to consume foreign goods. Sales clerks at Dior and Roberto Cavalli seemed to support the view that culture plays a role in stimulating consumption, noting that "Moroccans like to be stylish" and make up the majority of their clientele.

Â¶14. (SBU) Strict foreign currency exchange controls may also contribute to consumption in Casablanca. While Morocco has loosened restrictions on the amount of currency Moroccans can take out of thecountry, external controls are still in place. Unable to put significant savings overseas, many Moroccans invest and spend locally.

Â¶15. (C) Comment: The wealth that is evident in Casablanca indicates many positive developments, including stock market and real estate booms, fueled by remittances and strong foreign investment. It alsosuggests some tough-to-track, but significant, negative elements, such as drug-trafficking and deep-seated corruption. No matter what the sources of wealth, however, the contrasts between rich and poorin Casablanca are likely to persist, as there are few signs of trickle down. If Casablancans do not have opportunities to share in the wealth that surrounds them, the risk of broader social tensionsis likely to increase. End Comment.

Bouteflika said he hadrecently met the King's brother, Prince Moulay Rachid, inSeville, where they were both guests of King Juan Carlos.Bouteflika observed that he had found he could have a broaddiscussion with Moulay Rachid. "We joked and chattedcomfortably," Bouteflika commented, "but I cannot do thiswith the King, we do not have the same sense of humor!"

un passage important de boutef

Citation :

ThePolisario cannot drag Algeria into war, he stressed. But ifthey decided to fight "on their own territory," that would betheir decision. If they did so, they would not be allowed tofight in Western Sahara and then return to Algeria as a base.

Excerpt from document(S/NF) Summary: Morocco and Israel took advantage of Israeli participation in the June 3-5 Global Initiative to Combat Nuclear Terrorism seminar in Rabat to re-launch a diplomatic relationship that had been on ice since the Israeli military action in Gaza in December 2008 and January 2009.

1. (S/NF) Summary: Morocco and Israel took advantage of Israeli participation in the June 3-5 Global Initiative to Combat Nuclear Terrorism seminar in Rabat to re-launch a diplomatic relationship that had been on ice since the Israeli military action in Gaza in December 2008 and January 2009. The Israeli director of Maghreb Affairs later told EconOff that Moroccan Ministry of Foreign Affairs Secretary General Youssef Amrani had indicated willingness to resolve pending issues, including overflight permission, but that theGovernment of Morocco (GOM) had not yet delivered, an outcome she found unsurprising. The diplomat expressed the Government of Israel's (GOI,s) wish that the GOM more actively support Palestinian Authority President Mahmoud Abbas, and identified other possible "win-win" opportunites for Morocco-Israel cooperation. End Summary.

2. (C/NF) Eynat Shlein-Michael, Director of Maghreb, Syria and Lebanon Affairs of the Israeli Ministry of Foreign Affairs accompanied her MFA colleague Israel Tikochinski of the Arms Control Department to the Seminar on Preventing Illicit Trafficking in Nuclear and Radioactive Materials held in Rabat, June 3-5 under the Global Initiative to Combat Nuclear Terrorism (GICNT). Not engaged by professional interest in the seminar, Shlein-Michael told EconOff she viewed the conference as an opportunity to engage bilaterallyMorocco's Ministry of Foreign Affairs and Cooperation (MFA), renewing a relationship which had been cut off by the Israeli military intervention in Gaza. --------------------------------------------MFA Eager to Highlight Israeli Participation--------------------------------------------

3. (S/NF) Shlein-Michael related that MFA Secretary General Amrani sought her out for a pull-aside meeting during the June 3 MFA-hosted dinner for seminar participants, and profusely welcomed her delegation. He also made a point of introducing her to the French and Russian Ambassadors, she noted, apparently very pleased to highlight the Israeli presence. Shlein-Michael assessed, however, that Amrani's enthusiasm was not shared by all of the MFA, and working level officials had delayed issuing a letter authorizing visas on arrival in Morocco for the Israeli delegation until literally hours before the delegation left Israel. Withoutthe mission's urging the MFA to act, the visit would havebeen impossible, she stated. -------------------------------------------Delay in Overflight Permission is "Typical"------------------------------------------- 4. (S/NF) Shlein-Michael reported that her primary agenda item with Amrani was finalizing an agreement that had been pending for over six weeks to allow El Al Airlines to transit Moroccan airspace en route to Brazil, a routing that would save hours of flight time and thousands of dollars in fuel costs, and would also earn Morocco transit fees. Amrani promised her that the permission would be finalized the nextday, Shlein-Michael stated, but the MFA had not yet finalized it as of two days later. Shlein-Michael indicated that she was not surprised by the delay, commenting that Moroccan diplomats frequently express their agreement with Israel but then do not complete what they have promised. "They like to talk a lot, but never deliver," she concluded. --------------------------------GOM Was Ready for a Livni Visit?-------------------------------- 5. (S/NF) Shlein-Michael further reported that Amrani enthused about the progress in bilateral relations that had appeared to be blooming in November 2008 (Ref A). It was a shame that former Israeli Foreign Minister Livni's hypothesized trip to Morocco had not materialized, Amrani told her, commenting that "we were ready for her to come in January." Shlein-Michael expressed skepticism of this statement to EconOff, adding that any thoughts of an ministerial visit have been scotched since the formation of the new Israeli government. -----------------------------------What Does Israel Want from Morocco?----------------------------------- 6. (S/NF) When questioned what Israel would most like to see from Morocco, Shlein-Michael immediately responded that the GOI wants the GOM to support the Palestinian Authority (PA). Morocco "does less than anyone," she complained, commenting that smaller states like the UAE and Oman were far morevisible in lending support to Abbas. We want Abbas to succeed, Shlein-Michael continued, and we want Arabgovernments to visit him in the West Bank, publicly declare their support for him, and show the Palestinians that he has international legitimacy and influence. Shlein-Michael complained that, while Arab governments were lining up to demand Israeli facilitation of meetings with Arafat when he was confined to Ramallah during the second intifada, few are interested in visiting Abbas now despite the much more welcoming environment, and the PA's need for support against its HAMAS rivals. The GOI has made clear to Arab governments that it will facilitate the visits and that Israel does not request any bilateral component in such a trip. Morocco "has the same domestic concerns about HAMAS-type movements" as Israel and the PA, Shlein-Michael said, and it should have a keen interest in legitimizing the PA and Abbas against HAMAS.

---------------------Ideas for Cooperation---------------------

7. (S/NF) In addition to the most pressing issue of approving El Al overflight rights, Shlein-Michael suggestedthat another "win-win" issue for Morocco-Israel cooperation is allowing visas on arrival for Israeli tourists. The inconvenience of seeking a Moroccan visa in a third country significantly depresses tourism from Israel, Shlein-Michael asserted. Currently, about 60,000 Israelis visit Morocco each year despite the inconvenience, but that number would jump if Morocco allowed visa on arrival. Tunisia gives Israeli tourists visas on arrival, she noted, "and we have much better relations with Morocco." 8. (S/NF) Additionally, Shlein-Michael asserted that Morocco would benefit by engaging Israel on issues involving international organizations. The GOM does not seek Israel's support on candidates for positions in international organizations or votes on Moroccan proposals to host international events. The GOI would often be willing to support Morocco's position on many of these issues, Shlein-Michael asserted, but finds out about them too late because of the lack of outreach from the GOM. ------------------------Comment: Slow and Steady------------------------

9. (S/NF) Amrani's reported enthusiam to renew discussions with Israeli representatives highlights both the productive relationship that Morocco has shared with Israel in the past, as well as the serious damage done to that relationship following the Gaza fighting and the emergence of the Netanyahu government. While Shlein-Michael may see tepid actions by the GOM, public anger over the images of war in December and January have handcuffed the GOM's ability to continue business as usual, and it will take some time forthat aversion to abate. Her critique of Moroccan policy towards the PA does not square with what we have heard from the Moroccans. The GOM still stands solidly with Abbas and has consistently ensured that its engagement with the Palestinians supports the Palestinian Authority against HAMAS (Ref B). We will continue to encourage the GOM to support the PA, and hope to see opportunities for the GOM to reach out to the GOI should conditions permit. End Comment.

1. (S/NF) Summary: Morocco broke diplomatic relations with Iran and began a campaign against its domestic Shi'a minority at Saudi Arabian instigation, according to a Rabat-based Egyptian diplomat. According to the diplomat, Tehran had been using Morocco and its Embassy in Rabat for activities inMali and Senegal. Domestically, the diplomat emphasized that the anti-Shi'a campaign was aimed at neutralizing possible challenges to monarchist parties by Islamic groups in upcoming municipal elections. In addition, King Mohammed VI was seeking to reassert his position as a religious leader.End Summary.

2. (S/NF) Morocco broke relations with Iran and began a campaign against its domestic Shi'a minority at Saudi Arabian instigation, (information removed) told PolOff on March 30. XXX was aware his comments would be reported. He said there was almost daily contact between Mohammed VI's palace and Riyadhin the run up to the surprise March 6 severing of Moroccan relations with Iran (Ref A-D); and the intense consultations have continued (Note: He did not provide a source or basis for this comment other than to say "our information shows."End Note.). embassy believes that Saudi Arabia has enlisted King Mohammed VI personally (and not the Government of Morocco, which was as surprised as the rest of the world at the rupture, XXX noted) in its geopolitical strategy to counter Iranian influence. In return for active Moroccan support, Saudi Arabia will ensure a continued flow of subsidized oil to Morocco, and may plug holes in Morocco's foreign direct investment balance sheet resulting from recent Gulf withdrawals from major projects as a result of theglobal financial crisis.

3. (S/NF) XXX said goading Iran, a country with which it had limited economic interests, and demonizing the Shi'a, a powerless minority group, was a small price for Morocc o to pay for a strategy that could have major payoffs. He added that the King was "killing several birds with one stone" with his actions, and was also seeking to reassert his position as Commander of the Faithful (Note: Supreme religious leader forthe Moroccan Malachite branch of Sunni Islam. End Note.).

4. (S/NF) According to XXX, Iran has sought to increase the influence of Shi'ism in West Africa, where Tehran had been using Morocco (which is a regional air hub) and its Embassy in Rabat as a jumping off point for activities in Mali and Senegal. A former Iranian ambassador was also apparently traveling to Tangier, Tetouan and other cities in Morocco to lecture and identify promising young religious students from the Shi'a community for familiarization visits to, and further training in, Iran.5. (S/NF) Mohammed VI apparently saw this as a personal affront to him and a direct challenge to his religious and economic authority. (Note: Contributions from the wealthy Tijani sect in Senegal and Mali augment Palace coffers. Many Muslims in West Africa look to the Moroccan Monarch as their religious leader. End Note). Although he did not provide any basis for the supposition, XXX said he believed thatMohammed VI had probably been planning his move for at least a year. XXX also speculated that the Palace was also worried about the prospect of Moroccan foreign fighters returning from Iraq, possibly having been recruited and trained by Iran, and slipping into Iranian networks in Morocco. 6. (S/NF) Domestically, XXX emphasized that the anti-Shi'a campaign was also directed at dissident Islamicgroup Adl Wa Ihsane (The Justice and Good Works Organization) which has recently signaled its desire to become a legitimate political party. The group, which has at times called for the abolishment of the monarchy and the establishment of an Islamic republic, is believed to have wide popularity amongpoor and middle class populations unhappy with the political system, which they view as corrupt. XXX said that the Palace is trying to be "more conservative than the fundamentalists" in a bid to neutralize their drawing power. 7. (S/NF) On the Doha conference (Ref E and F), XXX said the King's dithering about whether he would or would not attend was a sign of the difficult balancing act he was attempting to carry off by keeping Saudi Arabia happy, while not alienating Qatar. XXX said that by sending his brother Moulay Rachid to the summit, despite his own last minute withdrawal, Mohammed VI showed respect to the Qataris while not enthusiastically endorsing their leadership bid.Had he sent someone of lower stature, such as the Prime Minister, it might have been read as a snub, XXXexplained. (Comment: We agree.) 8. (S/NF) Comment: Local observers continue to wonder about the King's actions against Iran. Our interlocutor may have had more than one purpose in addressing these issues with us, but many of his observations accord with our own. His concerns are forwarded as an example of the generaldiscussion on this issue here. We have not been able to independently verify XXX's statements, but he hasprovided us with accurate and insightful information on Iranian issues in the past. In a previous conversation with PolOffs, he raised a flag over deep Moroccan concern withIranian activity several months before the severing ofrelations. End Comment.

1. (C) Summary: Although the Western Sahara negotiationshave now re-started (Reftel), the conflict is 34 years old.The Government of Morocco (GOM) has invested tremendousresources in the territory, and some observers estimate thatit spends USD 2.7 billion per year on the territory and its385,000 residents. The level of development and of socialservices clearly exceeds the level in Morocco proper.Significant voter participation )- despite a Polisario callfor a boycott -- in the June 12 local elections may be a signthat support for independence is waning although support forself-government is real. Serious human rights abusers havebeen transferred, and respect for human rights in theterritory has greatly improved, reaching the same plane as inMorocco. However, advocating independence is still a redline, and the GOM refuses to register pro-Polisario NGOs.Giving the territory more autonomy, improvingAlgerian-Moroccan relations, enhancing regional integration,building real confidence, and addressing all parties,propaganda seem essential to resolving the conflict. EndSummary.

2. (C) Since King Hassan II launched the Green March in1975, the Western Sahara issue has been intimately linked tothe stability of the throne and Morocco itself. Hassan,twice victim of coup attempts and for years at war with theleft, used Western Sahara to bolster nationalism and park hisarmy far away in the desert. More recently, however, thatlink has blurred. King Mohammed VI is more secure,maintained in power more by love than fear and facing noapparent major domestic threat. He recently has somewhatdistanced himself from the issue, however, and has notvisited the territory in three years, a stark contrast to hisperipatetic ribbon cutting throughout the Kingdom.

3. (C) The GOM continues to subsidize the territory andprovide tax and duty exemptions that form the base of much ofthe private fortunes there (mostly key clans loyal to thethrone and a few senior military). Despite some siphoning,the investment has produced higher levels of urbandevelopment than in comparably sized cities in Morocco properand made the capital, Laayoune, the first city without anyshantytowns. Social indicators such as access to and levelof education and availability of health care and socialfacilities exceed Moroccan norms and far surpass those incomparably sized Morocco,s cities. Growth in Morocco hasmade these expenditures much more bearable to Rabat,sexchequer than they once were.

4. (SBU) In April 2009, a local weekly newsmagazine TelQuelpublished an article laying out and likely even exaggeratingwhat the Sahara was costing Morocco. TelQuel claimed thatthe GOM has spent 1.2 trillion dirhams on the territory since1975 and is spending 3 percent of GDP or USD 2.7 billion peryear, including the funds to maintain two-thirds of the RoyalArmed Forces in Western Sahara. (Note: TelQuel faced noconsequences for the article. Even with the relativeexpansion of the freedom of the press in Morocco to coversubjects formerly taboo, this was astonishing. End Note.)

5. (C) In the June 12 local elections, &First Friend8Fouad Ali el Himma,s Party of Authenticity and Modernity(PAM) challenged local Laayoune strongman and RoyalConsultative Council for Saharan Affairs (CORCAS) headKalihenna Ould er Rachid. The PAM lost, despite having an elHimma protege installed. The Ould er Rachid family and clancontrol the Tammany Hall-like Istiqlal party machine that hasrun the territory for many years, and played a major part inwinning the Prime Minister,s chair for party head Abbas ElFassi. Voter participation in the Sahara, stoked by clanrivalries, was far above the norm, despite aPolisario-declared boycott. Some pro-independence Sahrawisreportedly voted for the Ould er Rachid because they alonewere deemed strong enough to stand up to the government inRabat. This real political competition, while perhaps notdemocracy, seems far more open than the Cuba-like Polisariosystem. It underscores the fact that there is a significantpart of the population of the Sahrawi territory, in additionto most immigrants, who support Moroccan sovereignty.

6. (C) After it took control of Western Sahara, Moroccotried to affect any vote by promoting immigration by itsnationals, who now are well over half of the some 385,000residents of the territory. Perhaps half of the immigrants,however, were themselves Sahrawis, from areas just north ofthe dividing line that were also home to some of the mostnationalistic Sahrawis. In a referendum that could includeindependence, they are not seen by the GOM as reliablevoters, partly explaining GOM reluctance to go to a vote.(Comment: Curiously, we know of no advocate of independencethat has ever claimed the &Sahrawi8 territories in Morocco,Algeria or Mauritania as part of a national homeland,although some members of the CORCAS unsuccessfully tried toinclude the Moroccan parts in the autonomous region, when itwas first proposed. The absence of such larger nationalism,along with the Polisario,s 1970,s war against Mauritania--the world,s only Sahrawi state -- suggest the conflict isless nationalist than geopolitical, linked to the much olderdispute between Algeria and Morocco, and hardly boosts thecase for an independent state. End Comment.)

7. (C) Given the small population at stake, Spain,sgranting of Spanish nationality, with the possibility ofmigrating to Spain, its nearby Canary Islands or elsewhere inEurope, is significant, and, indeed in better times,resettlement could be a simple way of resolving the plight ofthe refugees.

-----------Who Counts?-----------

8. (C) The UN process recognizes the parties in thenegotiations as Morocco and the Polisario. This asymmetrymakes any resolution difficult, as it does not recognize thedeterminative role of Algiers, which the Moroccans see astheir real adversary in this dispute. It also neglects thediverse views among the Sahrawis.

9. (U) The human rights situation in the territory hasdramatically improved since a brief &intifada8 in 2005.Like Morocco itself, Western Sahara has come a very long wayfrom the mass disappearances of the &years of lead8 duringHassan II,s reign. Pro-Polisario Sahrawis are able toorganize under the rubric of human rights activists, whichmost of them legitimately pursue, such as last year,s RFKaward winner, Aminatou Haidar from the Sahrawi Collective ofHuman Rights Defenders (CODESA). In just over a year,restrictions on their international travel have disappeared.

10. (C) Since mid-2008, once common beatings and arbitraryimprisonment have also essentially ceased. One key to thereduction in abuses last year was the transfer oflong-serving security officials with consistent records asabusers. Activists and officials confirmed in July 2009 thatmore transfers (many by promotion) had recently taken place,and most well known abusers are reportedly now gone. Allsources report the territory is quiet, with residents hopefulfor some political progress.

11. (C) What opponents of Morocco cannot do is explicitlyorganize in favor of independence or a referendum thereon,nor can they publish or even distribute tracts on thesubject. In addition, they are denied by the government theright to operate as legal entities. Establishing theserights would not only be just, but would help buildconfidence in a consensual solution that would involvere-integration. The Sahrawi Association of Human RightsVictims (ASVDH) has even obtained court approval for itsregistration as an NGO and won on appeal lodged by theInterior Ministry (MOI), but has not been able to get localofficials to accept its registration. The USG has pushed forthis for some time. We recently heard that the local Walihas proposed to MOI that it accept the registration but thedecision is pending. We should press the GOM on this bothhere and in Washington.

12. (C) Despite this substantial progress, which leaves thehuman rights situation in Western Sahara nearly equivalent toMorocco, Morocco campaigned for most of the year and spentscarce diplomatic capital in a successful effort to push backproposals for the UN to have a monitoring role on this issue.It is possible that they have understood the opportunitycosts of that strategy and appear more recently to have beensomewhat less vocal on the issue.

--------------------What the People Want--------------------

13. (C) Extensive interviews and independent sources in theterritory suggest that the principal goal of most Sahrawis ismore self-government than self-determination; a desire morefor protection and identity than independence, an army andembassies. The small vocally pro-Polisario minority,including many of the human rights activists, formerlyenjoyed the support of the &silent majority8 of theseSahrawis, particularly during periods of repression.Development and reduced oppression have reduced this support.The Sahrawi &silent majority8 in the territory has beenintrigued by the prospect of autonomy and has generallyquietly awaited its development. Recently, a pro-Polisarioactivist, when asked, confided to us that he believed that ina free election held now a majority of voters in theterritory would choose autonomy.

-----------------------------On the Other Side of the Berm-----------------------------

14. (C) While not the competent Mission to comment on thePolisario or the camps, Embassy Rabat understands thesituation for the refugees in Tindouf is difficult butsupport for the Polisario appears strong. Nevertheless, wehear from credible Sahrawis that there is growing interestthere in a negotiated solution, belying the stories ofunrealistic saber-rattling, frequently attributed to Sahrawiyouth. GOM calls for a census and audit of internationalprograms seem reasonable to us. Finally, if there is noprospect of a solution, re-settlement should be considered anoption. The Spanish decision in 2008 to accord passports to1975 residents of its former colony could be implemented inTindouf as it has been in Laayoune (but not in the currenteconomic climate).

-------------------Frozen Negotiations-------------------

15. (C) Meanwhile, the UN Secretary General,s PersonalEnvoy for Western Sahara has struggled to get the UNnegotiations back on track. The negotiation processre-started in 2007, after Morocco tabled a proposal forautonomy that had been carefully negotiated with the BushAdministration. The main impetus to getting the planproduced was then-USUN Permrep John Bolton,s threat (October2006) to end MINURSO,s mandate. When first released, theUSG called the autonomy proposal &serious and credible.8In substance, the proposal was serious, including localpolice and some independence for the judiciary, and wasaccompanied by a declared willingness to negotiate. It wasalso viewed as credible by the international community,including explicitly Russia and implicitly China, whichnearly universally expressed a willingness to accept this asa possible outcome, if agreed. Credibility was an issue,however, among Sahrawis on both sides of the berm, as therewas little confidence, given past Moroccan evasions, thateven if agreed, the GOM would implement the plan. Thiscredibility gap has narrowed, but only slightly, due to theimprovements in the human rights situation. Credibility is,therefore, key to winning hearts and minds.

16. (C) In April 2007, the United Nations Security Councillengthened the mandate of MINURSO to 12 months (from six) andthe &Manhasset talks8 (named after the Long Island, NewYork town where they were held) began. The Moroccans, whilenegotiating with the Polisario, showed them no credence andsent Moroccan Sahrawis to seek defectors. CORCAS headKalihenna questioned the Polisario,s right to be there. ThePolisario broke diplomatic and Middle Eastern protocol byrefusing to shake hands with the Sahrawis on the Moroccandelegation and walked out or turned away when they spoke.

17. (C) Neither side offered any compromise or consideredthe arguments of the other. This was hardened when, at theend of 2007, King Mohammed VI publicly instructed hisdelegation to discuss no solution but autonomy, creatinglittle room for discussion. This hard-line stance may havebeen bolstered by what was perceived in the Palace asuncritical support from Washington. In the end, there was noresult after four rounds of rotating restatement of staticpositions. Former UN Personal Envoy Peter Van Walsum citedimmovable Moroccan commitment to retain sovereignty, andcalled the prospect of independence unrealistic. For thisunusual frankness, the UN let Van Walsum go, at Algerian andPolisario insistence.

18. (C) The new Personal Envoy, Ambassador Christopher Ross,long one of the stars of U.S. diplomacy in the region, seemsbetter positioned than anyone to budge President Bouteflikaand his government. In recognition, he was granted theadditional mandate to help improve Moroccan-Algerianrelations. King Mohammed VI took note of this and conveyedthrough Ross an offer of unconditional, at-any-level andon-any-subject, bilateral talks. Ross did get Algeria toagree to go to the &informals8 but only as observers. Hegot no response on the bilateral issue, although it is stillearly in Bouteflika,s new term. The informal meeting thismonth in Vienna has at least re-launched the negotiations.

19. (C) Algeria and Morocco are demographically similar butwith differences in historical experience that go backhundreds of years. About a year after Algeria,s hard-wonindependence, it and Morocco fought &The War of the Sands,8over their then-disputed frontier, drawn by colonial France.In 1975, when the Algerians sheltered the Polisario, it wasat least as much a reflection of their historical rivalry asideological support for a fellow liberation movement. KingHassan II managed to work out a frontier agreement with theAlgerians which the GOM maintains has been ratified, andneeds only an exchange of instruments of ratification. Thesubsequent closure of the Algeria-Moroccan border is now ananomaly in a Mediterranean region of growing links. Therehave been modestly growing functional links in recent years,much of it under Arab Maghreb Union auspices and in 2008 sometechnical agreements were signed. But direct high-levelcommunication remains cut and both quiet and public GOMovertures to reopen it have been rebuffed. The Government ofAlgeria (GOA) turned down then-Secretary Rice,s invitationfor a trilateral ministerial meeting on the margins of the2008 UNGA.

-------Comment-------

20. (C) Algeria, Morocco and the Western Sahara dispute is achicken and egg situation. Algeria has indicated relationscannot improve until there is self-determination in WesternSahara. Morocco, following the close links between thePolisario leadership and their Algerian hosts, remainsconvinced that there will be no agreement if relations withAlgiers do not improve. In response, as of June 2009, theMoroccans have maintained that their principal goal now israpprochement with Algeria, which could be discussedseparately.

21. (C) The international community is ready to supportMaghreb rapprochement and integration, which can only occurin parallel with a settlement of the longstanding disputeover the Western Sahara and resettlement of thelong-suffering refugees. Then-President Putin of Russiaurged Algerian-Moroccan compromise in vain, as have theFrench, the Spanish, and the USG. We are not aware of any ofthe P-5 opposing an autonomy-based solution, nor have we seenreal urgency or priority for the international community toresolve a dispute over which there has been no real fightingfor 18 years. End Comment.

Â¶1. (C) SUMMARY: At a December 9 meeting, one of Morocco's leading business entrepreneurs XXXXXXXXXXXX, told EconOff that major institutions and processes of the Moroccan state are being used by the Palace to coerce and solicit bribes in the country's real estate sector.XXXXXXXXXXXX made clear to his XXXXXXXXXXXX interlocutors that Morocco's major investment decisions were in reality made by three individuals in the Kingdom: Fouad El Himma the former Deputy Minister of Interior who now heads the Party of Authenticity and Modernity, Mohamed Mounir Al Majidi who is the head of the King's private secretariat, and the King himself. "To have discussions with anyone else would be a waste of time", XXXXXXXXXXXX that, contrary to popular belief, corruption in the real estate sector during the reign of King Mohammed VI is becoming more, not less, pervasive. END SUMMARY.

--------------------------- A TALE OF ROYAL PROPORTIONS ---------------------------

Â¶2. (C) XXXXXXXXXXXX major institutions and processes of the Moroccan state are used by the Palace to coerce and solicit bribes in the real estate sector. While corrupt practices existed during the reign of King Hassan II, XXXXXXXXXXXX, they have become much more institutionalized with King Mohammed VI. Institutions such as the royal family's holding company, Omnium Nord Africaine (ONA), which now clears most large development projects, regularly coerce developers into granting beneficial rights to ONA, XXXXXXXXXXXX

Â¶3. XXXXXXXXXXXX

Â¶4. (C) XXXXXXXXXXXX ONA's XXXXXXXXXXXX reportedly told his interlocutors that Morocco's major investment decisions were effectively made by three individuals: the King, Fouad El Himma the former Deputy Minister of Interior who now leads the Palace-backed Party of Authenticity and Modernity, and Mohamed Mounir Al Majidi, who is the head of the King's private secretariat and his principal financial advisor. XXXXXXXXXXXX ------- Comment -------

Â¶5. (C) XXXXXXXXXXXX reality, of which most Moroccans dare only whisper -- the influence and commercial interest of the King and some of his advisors in virtually every major real estate project here. A former U.S. Ambassador to the Morocco, who remains closely connected to the Palace, separately lamented to us what he termed the appalling greed of those close to King Mohammed VI. This phenomenon seriously undermines the good governance that the Moroccan government is working hard to promote.